FactSet Research Systems Inc. is a leading provider of financial data, analytics, and technology solutions to investment professionals globally. The shares came under pressure as investors continued to discount the business for perceived AI disruption risk. We believe the market significantly understates FactSet's positioning. The company conducted a successful test flight of the latest version of Starship, demonstrating meaningful advancements in rapid and full reusability. We believe these developments support sustained long-term revenue and profit growth well beyond current levels.

In our view, FactSet Research Systems, Inc. (FDS) is the clearest example of a business shunned for all the wrong reasons. While the market has branded it a casualty of artificial intelligence, we see the opposite. As one of FactSet’s own clients, we know firsthand how deeply its data is wired into our research and how costly it would be to change providers. As we build AI into our research, our spending is likely to rise, not fall. To this end, FactSet partners with the large language model providers rather than competing with them. We added to the position on weakness.

We remain optimistic that all boast vast addressable markets, sustainable competitive advantages, and attractive and durable growth prospects. We expect their valuations to expand as these characteristics are again recognized by the market. FactSet Research Systems Inc. is part of a cohort that includes holdings such as Gartner, Inc., MSCI Inc., and Morningstar, Inc., which presently represents approximately 40% of our portfolio. On average, these stocks declined 43% over the last year despite producing low double-digit revenue growth and 22% profit growth.

We believe FactSet Research Systems Inc. is well-positioned in the market, benefiting from strong revenue growth and a robust balance sheet. The company is actively engaging in share repurchases, which reinforces our confidence in its valuation and future prospects. As businesses increasingly allocate capital towards growth, FactSet's competitive advantages and underpenetrated growth opportunities make it an attractive investment. We expect continued acceleration in its performance as it leverages its strengths in the evolving AI landscape.

FactSet's data projected S&P 500 first-quarter earnings growth of 13.0%, led by information technology, materials, and financials. This growth is indicative of the company's strong position in the market, particularly as the AI-related buildout is in full swing. The manager highlights that despite geopolitical tensions, the US economy is less energy-intensive and less dependent on oil imports than in the past, which bodes well for companies like FactSet that are positioned to benefit from these trends. The overall sentiment is positive, suggesting that FactSet is well-placed to capitalize on the current market dynamics.

We used price weakness to significantly increase our position in FactSet. Software stocks are currently being sold indiscriminately following recent results from PayPal and ServiceNow, as investors fear Artificial Intelligence will eliminate traditional software business models. We do not share this view, particularly regarding FactSet. Their proprietary data sets and portfolio reporting tools are deeply embedded in client workflows and, in our view, difficult to replace with generic AI tools. With the stock trading at just 13x our estimates of earnings, we moved from an initial stake to a full position.

FactSet Research Systems Inc. was mentioned in the context of performance attribution, but there was no explicit directional argument made regarding its future prospects or valuation. The letter discusses the impact of AI on businesses, including FactSet, but does not provide a bullish or bearish stance on the company itself.

FactSet Research Systems Inc. is mentioned in the context of the fund's performance, but there is no explicit directional argument made about the company. The letter discusses the overall portfolio structure and investment strategy without providing specific insights or opinions on FactSet's future prospects.

FactSet Research Systems is a leading financial data provider serving buy-side, sell-side, and wealth management clients. The company boasts over 45 years of consecutive top-line growth, reaching $2.3 billion in revenue for fiscal year 2025. As a classic 'compounder,' FDS maintains a sticky business model with retention rates exceeding 95%. Its operations consistently deliver high-teens returns on invested capital (ROIC) and stable cash flows, bolstered by a market-leading performance reporting suite. We believe these are both short-term headwinds that will dissipate over the next 24 months. Management sees strong demand ahead across wealth, hedge funds, and private markets. Q4 results showed that growth is reaccelerating, with higher renewal rates, and announcement for major new contracts with top players in banking.

Shares of FactSet, a leading provider of investment management tools, declined 35.8% and hurt performance by 73 bps in the quarter. The decline was due to industry-wide AI fears and uncertainty as to the competitive moat surrounding its data. However, despite these continued fears, the company continues to generate strong results that are better than company and investor expectations. They had their best quarter of new sales ever and indicated they are benefiting from AI through revenue enhancements, pricing uptakes, and cost containments not being hurt by it. We believe the company’s moat around trust, brand, and distribution is deeper than most investors realize.